Bay Area architects that turned to China for work when the U.S. economy stumbled say demand slowed in 2012 but is recovering.
THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN JANUARY 2013
When China’s economy sizzled red-hot a few years ago, the country quickly became a bubbling caldron of opportunity for Bay Area architecture firms, including San Francisco-based Heller Manus Architects. Its revenue from the Asian nation rose from 25 percent of total business in 2004 to 75 percent in 2008. (Overseas projects typically account for about 7 percent of a U.S. architecture firm’s billings, according to the American Institute of Architects.) “It was bad here,” said company founder and president Jeffrey Heller, “but China was still on a roll.”
Now, that once-robust growth has slowed as the world’s second-largest economy struggles with falling international demand for its goods in the wake of a lethargic U.S. economic recovery and an unresolved debt crisis in the Eurozone. During the third quarter, China’s gross domestic product growth slowed to 7.4 percent, down from the 7.6 percent rate achieved in the second quarter, according to London-based international research group TheCityUK. It was the country’s seventh consecutive quarter of shrinking growth, according to the China Daily.
And the economy isn’t the country’s only challenge as it enters 2013, the Chinese Year of the Snake. As part of a once-in-a-decade leadership change, President Xi Jinping took over as head of China’s ruling Communist Party in November. Eyes worldwide now watch to see what direction the government’s new leadership will take not only on the economy but human rights. While it is not exactly clear what the events mean for the Bay Area’s architectural community, one fact is certain—conditions in China are not what they were.
Opportunity for Heller Manus in China began to slow in 2011 when one project to design several office-retail-housing developments for a private client fell victim to the slump. “It didn’t materialize and shortly after that, things started to slow,” said William Higgins, principal of Mill Valley-based Architecture International Ltd., which had partnered with Heller Manus to handle the housing and retail portion of that project. Only 25 percent of the Heller Manus’ business came from China in 2012, Jeffrey Heller said: “Thankfully, work in the Bay Area has been stepping up.”
Likewise, the San Francisco office of Australia-based Woods Bagot—launched squarely during the Great Crash of 2008—turned to China during the lean times in the United States. Opening too late in San Francisco to benefit from America’s late-great boom, the firm immediately began focusing on China where several of the company’s executives had previously worked while employed at other architectural design companies.
Woods Bagot’s presence in China has steadily grown to produce about 20 percent of his office’s total revenue this year, said Patrick Daley, a principal at the firm. Their work for private developers and government-associated groups includes projects in a dozen Chinese cities, designing everything from skyscrapers to offices that are part of beachfront resorts intended to cater to the country’s growing middle class. “We haven’t seen projects—either in hand or that we’re bidding for—suddenly turn off,” he said.
Yet the office intentionally avoids heavy reliance on any one country, based on the cautionary experience it had in the Middle East, Daley said. Starting in 2004, that fast-growing region soared to about 40 percent of the company’s global revenue. But in 2008, the worldwide real estate slump also hit the Middle East, and once business there slowed, Woods Bagot had to cut staff. “It was all great, high-paying work, but then it turned down very quickly. It was hard to overcome that,” Daley said. “The lesson was to be careful about leaving such a high percentage of your overall revenue in one location. Diversify if possible.”
Photos of Rob Steinberg by Chad Ziemendorf